16/615: Expresso on Ireland's Repayment of IMF Loans

My comment on Ireland's early repayment of IMF loans for Portugal's Expresso, 13/06/2015 ECONOMIA page 11

9/9/2014: An IMF Loans Deal Can Be a Win-Win for EU and Ireland

Earlier today I was covering the topic of Ireland seeking an early repayment of the IMF loans on the CNBC (@CNBCWEX) http://video.cnbc.com/gallery/?video=3000309131. Here is a quick note summarising my views on the topic.

DEAL: The Irish Government is hoping to refinance the IMF portion of the Troika debt to achieve annual savings of some EUR375 million due to lower bond yields enjoyed by Ireland today compared to the IMF interest charges. The Government is looking to pay down EUR15 billion of the EUR22.5 billion total the country owes to the IMF.

IMF loans come with 4.99% interest rate against 1.80% marketable yield on Irish Government 10 year bonds. Back in July, Irish Finance Minister, Michael Noonan said he aims to refinance the first EUR5 billion of IMF loans before end of December, with the same tranche going for refinancing in the first half of 2015 and a final EUR5 billion in 2016.

Since then, following the ECB’s latest rate cut last week, Irish Government yields hit negative territory and yields on 10 year paper are currently trading at yields of under 1.7%.

The Government also has EUR20.6 billion in cash reserves that can be used to fund IMF loans buy-out. And the fiscal performance in 8 months through August 2014 has been surprisingly strong, even stripping out one-off payments.

INCENTIVES: The Irish Government interest in refinancing IMF loans is driven by both political and economic considerations.

On political front, the Coalition Government suffered heavy defeats in the European and Local elections earlier this year. So the Government needs to deliver new savings in Exchequer spending to allow for a reduction in austerity pressures in Budget 2015. Savings of few hundred millions of euros will help. And an ability to claim that the IMF loans have been repaid, even if only by borrowing elsewhere to fund these repayments, can go well with the media and the voters tired of the Troika. Optics and reality are coincident in the case of refinancing IMF borrowings, creating a powerful incentive to deliver.

Additional consideration is provided by the Government failure to secure a deal on legacy banks’ debts (see below), which de facto aligns Irish Government political interests with those of the EU.

On economic incentives side, the Government clearly is forwarding borrowing and re-profiling its bonds/debt maturity timings to minimise short-term pain of forthcoming repayments and to safeguard against the potential future increases in the rates and yields. Especially since the latest Exchequer figures are pointing to Ireland significantly outperforming the Troika targets for 2014-2015 and the economy is showing signs of recovery.

All-in, this is a smart move for the Irish Government and a win-win for the economy, the EU and the governing Coalition.

SUPPORT:  In August, the Economic and Monetary Affairs Commissioner Jyrki Katainen said that in his view, Irish plan to pay down IMF portion of the Troika loans ahead of schedule makes sense.

The EU Commissioner statement came on foot of the letter by the IMF mission head to Ireland, Craig Beaumont in which he said that the Fund will not impose early repayment penalty on Ireland, were the Government to refinance its debt.

Last week, Mario Draghi cautiously commented on the deal. When asked about his position on it, Draghi said that the ECB “took note” of the proposal and will monitor “very, very closely what is being done with the sale of assets so that monetary financing concerns are being properly and significantly addressed.” In other words, Draghi explicitly linked the IMF refinancing deal with the IBRC-legacy bonds held by the Central Bank of Ireland. The ECB has always signalled that it is interested in seeing Irish Government disposing of these bonds at an accelerated schedule. The accelerated disposal of the bonds means that the Irish Government sells these bonds in the markets to private holders and the coupon payments on these bonds become payable not to the Central Bank (which can recycle payments back to the Exchequer) but to private bondholders. On the other hand, however, the value of these bonds is now likely to be over par, implying that disposing of them today can generate capital gains for the Exchequer. At any rate, Mr Draghi’s statements does signal the ECB willingness to deal on the prospect for refinancing of the IMF loans.

Regardless of Mr Draghi’s comments, we had more statements in support of the deal so far in the last few days with unnamed EU Commission sources indicating further EU support.

As the decision remains with the Euro area governments on whether such a repayment will trigger automatic repayment of other multilateral loans, these are more important than Mr. Draghi’s position. As long as the ECB does not actively object to the deal, Minister Noonan is likely to secure an agreement without triggering automatic repayment of the remaining loans.

The reason for this is simple. In June 2012, the EU promised to review sustainability of Irish public debt in light of potential retroactive recapitalisation of the Irish banks. However, with subsequent developments, it became painfully clear that the Euro states had no intention of providing any significant support for Ireland. In order to back out of the proverbial corner, the EU will look favourably on any debt restructuring or refinancing deal the Irish authorities can design that does not imply retrospective recapitalisations.

Letting Ireland have a EUR375 million annual breathing space is a cheap solution to the EU's dilemma of issuing promises, without any intention of following through on them. 

REALITY: The truth, however, remains simple. EU and ECB insistence in 2008-2011 on paying in full on Irish banks debts has derailed Irish economy and is costing this country in terms of lower economic growth, high unemployment, high burden of taxation and dysfunctional banking system saddled with legacy debts. EUR375 million savings - welcome as they might be - is a proverbial plaster applied to a gaping wound left on Irish public finances by the crisis.

IMPACT: In the short run, refinancing IMF loans will provide improvement in the sovereign cash flow, but can cause the rebalancing of some private portfolios of Irish government debt.

In the longer run, the direct effect of a successful refinancing of the IMF loans can lead to a small, but a positive change in the Government debt dynamics. The definitive point here is what the Irish Government is likely to do with any savings achieved through the debt restructuring.

If the funds were to be used to fund earlier closing off of other official loans or closing off the remaining (and still large) deficit gap, there is likely to be a positive impact in terms of markets expectations and this will support better risk assessment of the sovereign debt dynamics. However, this is unlikely, due to the strong political momentum in favour of spending the new savings on reversing, in part, public sector spending cuts and state wages moderation. The problem is that in this case, interest costs reductions achieved under the deal will simply be consumed by remaining inefficiencies within the public sector. Such a move would likely be detrimental to Ireland's debt sustainability in the longer run.

It is worth noting that in 8 months through August, the Government took in EUR971 million more in tax revenues (UER700 million if one-off measures are netted out) than it planned in the Budget 2014, so some tax rebate is overdue, given the hefty burden of taxes-linked austerity on Irish economy. But the state is still borrowing EUR800 million per month to fund its spending. And we spent around EUR5.5 billion so far this year on funding interest payments on the debt.

4/9/2014: Repaying Ahead of Schedule: Ireland & IMF Loans

Last week Portugal's Expresso published a big article on Irish plans to repay earlier the IMF loans. The link is here: http://fesete.pt/portal/docs/pdf/Revista_Imprensa_30_e_31_Agosto_2014.pdf (pages 37-38)

My view on the subject in full:

1-      The Irish hurry is politically engineered or they understand that the present low sovereign bond yields mood can be a short-term window of opportunity in the Euro area?

In my view, Irish Government interest in refinancing IMF loan is driven by both political and economic considerations. On political front, following heavy defeats in the European and Local elections, the ruling coalition needs to deliver new savings in Exchequer spending to allow for a reduction in austerity pressures in Budget 2015 and more crucially support increased giveaways in the Budgets in 2016 and 2017. Savings of few hundred millions of euros will help. And an ability to claim that the IMF loans have been repaid, even if only by borrowing elsewhere to fund these repayments can go well with the media and the voters tired of the Troika. On economic incentives side, the Government clearly is forwarding borrowing and re-profiling its bonds/debt maturity timings to minimise short-term pain of forthcoming repayments and to safeguard against the potential future increases in the rates and yields. In addition, there is a very apparent need to refinance the IMF loans as the interest charges on these is out of line with the current funding costs for the Government. It is worth noting here that the Irish Government is far from being homogeneous on the incentives side. For example, from Minister for Finance, Michael Noonan's statements, it is pretty clear that the incentives to refinance the IMF loans are predominantly economic and financial. On the other hand, for majority of the Labour Party ministers and a small number of the Fine Gael Cabinet Ministers, the incentives are more political.


2-      The move is also a way of reducing the “official sector” debt in the overall sovereign debt composition (higher than 50 per cent)?

The issue of the 'official sector' debt as opposed to the total public debt is less pressing for the Irish state. Larger share of the official sector debt in total debt composition provides short-term support for bonds prices, as higher official sector debt holdings imply lower private sector debt holdings in the present. However, in the future, the expectation in the markets is that the official sector debt will be refinanced via private markets, thus higher share of official sector debt today is a net negative for the future debt exposures. The result is that higher official share of debt is supporting lower current yields, but rises future yields, making the maturity curve steeper, ceteris paribus. In the current environment, Irish government is not significantly exposed to shorter-term debt markets, but it is exposed to longer termed debt roll-over demands that are consistent with political cycle. Reducing official exposures, therefore, can be supportive of the longer-term view of the debt issuance by the state. However, the issue is marginal to Irish policymakers and certainly secondary to the political and economic benefits the early repayment of the IMF loans brings.


3-      This initiative is useful to upgrade the sovereign debt sustainability?

In the short run, if successful, the initiative will provide improvement in the sovereign cash flows, but will cause the rebalancing of some private portfolios of Irish government debt. In the longer run, the direct effect of a successful refinancing of the IMF loans will most likely lead to little material change in the Government debt dynamics. The issue of the greater longer term concern is what the Irish Government is likely to do with any savings achieved through the debt restructuring. If the funds were to be used to fund earlier closing off of other official loans, there is likely to be a positive impact in terms of markets expectations on supply of Government bonds in the future and the direction of Irish fiscal reforms, both of which will support better risk assessments of the sovereign debt and Irish bonds. This is unlikely, however, due to the strong political momentum in favour of spending the new savings on reversing in part past savings achieved via public sector spending cuts and wages costs moderation. Such a move would likely be detrimental to Ireland's debt sustainability in the longer run. A third alternative is to deploy savings to reduce austerity pressures in the Budget 2015 across tax and spend areas. Tax reductions can be productive in stimulating sustainable growth and thus improving the fiscal position of the state in the longer run; spending cuts reductions will simply be consumed by remaining inefficiencies within the public sector.


4-      The Irish had some interesting political initiatives during the bail-out and post-bail-out period. First they change the annual promissory notes repayments into very long long debt (a kind of soft debt restructuring of 25 billion, 12 per cent of total public debt); then they decided for a “clean” exit opting out from the OMT constraints; and now they take the move to get out of IMF loans. In the framework of the Euro are peripheral countries this is an “innovation”?

The Irish government has taken a clearly distinct path from other euro area 'peripheral' states. However, this path is contingent on a number of relatively idiosyncratic features of the crisis in Ireland. Restructuring of the IBRC Promissory Notes was required due to political pressures of facing continued and clearly defined cost of the IBRC restructuring, but also by the significant pressures from the ECB to close off the ELA lines to IBRC, as well as Frankfurt's unhappiness with the structure of the Promissory Notes. In the end, this policy 'innovation' basically traded off short term savings for longer term costs and increased longer term uncertainty. It achieved substantial improvements in cash flow up front, but, depending on the schedule of bonds sales into the future, created little real savings over the life time of the loans. In the case of 'clean exit', Ireland benefited from the fact that a bulk of its deficits were incurred in extraordinary supports for the banks through 2011. In this sense, the Government had two years of relative stabilisation and decline in fiscal pressures before exiting the Troika programme. No other country in the euro 'periphery' had such deficit and debt dynamics. The move to refinance the IMF loans, however, is probably the first significant policy lead that Ireland deployed, as this move (if successful) will be paving the way for Spain, Portugal and Greece to follow in the future. Throughout the second stage of the euro area sovereign debt crisis (2012-present), the Irish Government deserves the credit for being recognised as being the one most actively seeking marginal improvements in the cash flow and rebalancing of debt costs and maturities within the euro area 'periphery'. But in part, this activism is also down to the fact that Ireland had a longer run in the debt crisis than any other 'peripheral' states and it deployed a plethora of various programmes, creating a policy map that is a patchwork of temporary and poorly structured programmes, like the IBRC Promissory Notes. Repairing these programmes offers Ireland a rather unique chance to get an uplift on some of its exposures.

26/05/2013: Ireland Hard at Work on Troika & Tax Haven Fronts

Several recent points raised in relation to the work being done by Minister Noonan are worth a quick consideration.

Point 1: Ireland, allegedly, is the best-performing 'Troika programme' in the 'periphery' (forget the semiotics of a country being a programme and 1/3 of the EZ being a 'periphery'). We are fulfilling all programme requirements and are even ahead of schedule on some (namely - issuance of bonds we don't have to issue). If so, then can Minister Noonan explain:

• Why have we needed all the material alterations to the programme, obtained in conjunction with 2011-2012 Greek 'rescues' (term extensions and rate reductions on loans), the restructuring of the promo notes, etc. If we are satisfying the programme requirements, then why do we constantly attempt (and succeed) in changing the programme?
• If, as a part of well-functioning programme, Ireland has already recapitalized its banks and if the measures - approved by the EU and the Troika - to rebuild Irish banking sector are working, then why does Minister Noonan constantly 'working' on finding ever more convoluted ways to shove more funds into them? As in using CoCos as here: http://www.irishexaminer.com/business/noonan-examining-ways-to-capitalise-banks-232186.html or tapping ESM as here: http://www.foxbusiness.com/news/2013/05/21/ireland-still-hoping-to-refinance-bank-debts-through-esm/

Point 2: Ireland, allegedly, is not reliant in its adjustment on beggaring its neighbours via asymmetric tax regime, when it comes to corporate tax rates. Per Minister Noonan (see: http://www.irishtimes.com/news/politics/oireachtas/us-senate-committee-quoted-incorrect-tax-rates-for-apple-activities-here-d%C3%A1il-told-1.1404834): "The ability of multinational companies to lower their global taxes using international structures reflected the global context in which all countries operated." 

But then, "Mr Noonan said ... “some multinational corporations, with the assistance of legal practitioners and tax advisors, have exploited the differences in these systems to their own advantage”." So, wait a second here: it is down to 'some' MNCs - with help of legal & tax advisors - to 'exploit' tax system to their advantage. "The Minister said tax management was an international business. “Very clever accountants and very clever lawyers are involved in it and they basically try to get into an unspecified space between the tax laws of two jurisdictions." 

Ok, we get the point - bad advisors and bad companies are exploiting good Irish regime or global regime. Were it not for this 'exploitation, one can assume things would have been different, right? Wrong: “Operating in that space, they find ways of avoiding the tax that otherwise would not have been payable.”

Come again? Apparently, some multinationals just love hiring expensive advisors to avoid tax that would not have been payable even absent these advisors. You see, per Minister Noonan, Ireland's reputational problems of being branded a tax haven stem from utter stupidity of some MNCs that are so dim, they hire useless but very clever advisors to devise complicated and clever schemes to avoid that which doesn't exist. 

Seems like Minister Noonan has been exposed to too much logic lessons as of late.

2/4/2013: Talkin of Gettin Things Really Wrong...

When Washington Post gets things badly wrong...

"Ireland doesn’t look likely to cause problems anytime soon. It’s been paying back the 2010 bailout from the E.U. faster than it had too [sic], which has pushed bond rates way down."
http://www.washingtonpost.com/blogs/wonkblog/wp/2013/03/30/cyprus-luxembourg-italy-or-malta-which-country-will-unravel-the-euro-zone/

Sorry, what?! Ahem... no... WHAT?!

23/3/2013: IMF 9th Review of Ireland's Programme

IMF Completed 9th Review with Ireland:

"Ireland’s strong policy implementation has continued and positive signs are emerging. Real GDP growth was 0.9 percent in 2012, and employment rose slightly over the year, although unemployment remains high at 14.2 percent. Further deepening its market access, Ireland issued €5 billion of 10 year bonds at 4.15 percent in March."

"The 2012 fiscal deficit of 7¾ percent of GDP was well within the 8.6 percent target. In 2013, the fiscal deficit is projected at 6¾ percent of GDP, moving toward the target of below 3 percent by 2015.  Public debt is expected to peak at 122½  percent of GDP this year and decline in later years provided growth picks up from the 1 percent rate projected in 2013."

"Financial sector reforms have continued to advance, but banks remain weighed down by nonperforming loans at about 25 percent of total loans." Per Mr. David Lipton, First Deputy Managing Director and Acting Chair:

"…problem loans remain high and accelerating their resolution is a key to economic recovery. The recent establishment of mortgage loan restructuring targets for banks is therefore welcome, and it will be supported by reforms announced by authorities that facilitate constructive engagement between banks and borrowers, promote the efficiency of repossession procedures as a last resort, provide banks with the right incentives through provisioning rules, and by sound implementation of the personal insolvency reform. Progress with resolution efforts for SME loans is also a priority.

“Building on the strong budget outturn for 2012, sound budget execution remains critical in 2013, including continued vigilance on health spending and a successful introduction of the property tax...

“Prospects for Ireland’s exit from official support have improved, yet continued strong policy implementation remains paramount given risks to medium-term growth and debt sustainability. Timely and forceful delivery on European pledges to improve program sustainability, especially by breaking the vicious circle between the banks and the Irish sovereign, would go a long way toward Ireland’s durable exit from drawing on official support.”

8/3/2013: German Lawmaker Challenges Debt Restructuring for Ireland & Portugal

Not exactly good news, and not exactly earth-shattering either, but...
http://www.reuters.com/article/2013/03/07/eurozone-germany-bailouts-idUSL6N0BZI9320130307

The point worth raising is that if Enda & Co do achieve restructuring of our Troika loans, they would de facto deliver a restructuring of Ireland's super-sovereign debt. This raises a number of issues:

1. Why are we seeking restructuring super-senior sovereign debt ahead of seeking to restructure non-sovereign debt, such as, for example banks debts?
2. If restructuring were to materially impact our long-term debt profile by lowering the NPV of our debt, would this not qualify as a 'structured' or 'cooperative' default? I know - the matter here is not material, but rather a label, yet don't we have a Government that staunchly refuses to default on private debts assumed by the State and then goes for a default (or even quasi-default) on super-senior debt?

These questions closely relate to the work I have done over the recent years on Irish Government debt and most directly to my chapter in What if Ireland Defaults? (link the chapter in a working paper format here: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1985617)

28/02/2012: Reforms in Ireland - at risk? (Sunday Times 26/02/2012)

My Sunday Times article from 26/02/2012 - unedited version.

So far, the explosive nature of Greece’s crisis has been a boon for Ireland, as international perceptions of our economic and fiscal fortunes have turned more optimistic in some analysts’ and investors’ circles. This shift in the sentiment, however, may be threatening to derail the already fragile momentum for economic reforms here.

Irish budgetary dynamics for 2011 were largely on target, although this achievement conceals significant pressures on the tax receipts side and the lack of real progress in tackling runaway spending in three core current expenditure areas – Social Welfare, Health and Education. In fact, much of the previous deficit adjustments have been based on the Governments picking the low hanging fruit of capital spending cuts, administrative savings, and substantial tax increases, soaking the middle and upper-middle classes. Budget 2012 was pretty much the firs attempt by the Irish Government to rebalance the overall budgetary dynamics that, since 2008, have penalized higher-skilled and entrepreneurs. It is hard to see how this approach of piecemeal changes targeting the path of political least resistance can continue delivering ever-rising levels of fiscal adjustments already pencilled in for 2012-2015, let alone maintain the budgetary discipline thereafter.

Accounting for the delayed December 2011 tax receipts that were incorporated in January 2012 figures, the Exchequer deficit in the first month of 2012 was €160 million ahead of that recorded in January 2011. This gap shows that the pressure on Ireland’s fiscal dynamics has not gone away.

There is a more fundamental problem looming on the horizon – the problem of growth. To deflate the public debt that is now well in excess of 107% of our GDP and climbing, we need some serious economic growth. On average, over the next 10 years, we will need growth of over 3% annually over and above inflation in order to bring our Government debt down to 90% of GDP. To sustain some private sector debts deleveraging will require even higher rate of growth. Compare the current situation with that in the 1980s and the maths required for budgetary and households’ deleveraging become dizzyingly high.

In Q3 2011, Ireland registered the twin contraction in GDP and GNP and majority of the analysts expect the same for Q4 figures. For the year as a whole, we are likely to post approximately 0.9% real GDP expansion. Forecasts revisions for Irish economic growth have been driving us beyond the bounds of the fiscal targets we set out for this year. The Budget 2012 assumed economic growth of 1.3% against the IMF, Central Bank, EU Commission, and ESRI forecasts of 0.9-1.1% growth. More recent February forecasts by the markets analysts and ESRI put the range for 2012 growth at -0.5% to 0.9%. Much the same is true for forecasts out to 2015, with Government growth prognoses coming in at a rather optimistic 2.43% annual average against IMF November 2011 projection of 2.25%. Taking the lower range of most current forecasts, the shortfall on Government current assumptions for growth can be as high at €5 billion – a sizeable chunk of change. Under the adverse shock scenario by the IMF, if average growth were to decline to 1% of GDP – a statistically plausible assumption – the shortfall will be close to €10 billion.

This means that the pressure is still very much on to deliver on 2012-2013 fiscal deficit targets of 8.6% and 7.5% respectively. More importantly, the entire recovery framework for Ireland is clearly misaligned. Instead of focusing on the simple short-term targets for fiscal deficits, Irish Government must focus on long-term growth environment. Putting the patient – the Irish economy – ahead of the disease – the fiscal and household debts overhang – is a must.

This puts into the context the events of the last two weeks. Specifically, it highlights the levels of unease with Irish Government plans being expressed, for now rather quietly, by some markets participants. It also underpins the subtle change in the Government own signals to the Troika. And, it is simultaneously contrasted by the Government public rhetoric that has been stressing the PR spin over sombre determination to act. Virtually all recent actions suggest that the Government is hoping that something will happen between now and 2013 to miraculously restore growth, thus alleviating the need for serious corrective measures on the current expenditure side.

First, take the Memorandum of Understanding (MOU). Last week, the Government review of budgetary adjustments targets stated that 2013 fiscal savings will be “at least €3.5 billion” (page 14 of the MOU). The subtle change of language from the November 2011 version of the MOU which did not include the words ‘at least’ in relation to 2013 target might be a sign that the Government is being forced to accept the reality of its multiannual growth projections being overly optimistic in the current global and domestic growth environments.

Yet, when it comes to outlining reforms agenda, the MOU contains nothing new compared to its previous versions. The already inadequate set of measures on dealing with personal debt announced last night is presented as the end-all reform. Dysfunctional energy and utilities sectors are barely covered with exception for one specific measure – creation of the unified water management bureaucracy. Inefficiencies in the domestic services sectors, poor institutions relating to supporting competitive markets in these sectors and labour markets reforms are treated with generalities in place of tangible proposals. Vague promises of reforms of social welfare system and structural reforms in the state enterprises sector and financial services unveiled and partially actioned in the past are simply repeated once again in the current MOU.

In contrast, the Government has claimed this week that it has rather specific targets for yet another spending project – the ‘jobs creation’ efforts to be financed via privatizations returns. In other words, unlike Charlie McCreevy who spent the money he had, Minister Noonan is eager to spend what he hopes to have. To-date, Minister Noonan has managed to spend quite substantial funds on ‘jobs creation’ with various announcements taking potential total bill for these initiatives to well over €1 billion annually. Outcomes? Well, none, judging by the QNHS and Live Register data. The JobBridge programme is a resounding failure with the vast majority of ‘apprenticeships’ in effect displacing real jobs that would have been created through the normal course of business growth. The ‘Vat stimulus’ to tourism and hospitality sector is another failure. Fas restructuring is shambles.

The privatization plans, supported by the ESB and other state monopolies, are clearly designed to minimize any potential disruptions in the status quo of the semi-states-dominated sectors. Thus, privatization-induced changes in the energy and transport sectors will be purely cosmetic, the structure of the regulated markets will remain as anti-consumer as ever. Vast swathes of the domestic economy will remain protected from private investment and enterprises as ever.

Despite major risks present in the global and domestic economic environments, the Irish Government is slipping into the comfort zone of PR exercises, photo opps, and foreign ‘investment missions’.

By postponing the reforms necessary to boost our economic growth potential, the Government currently is putting an undue amount of risk onto the Irish economy. Its gamble is that sometime over the next 9-12 months Irish economy will be propelled to a miraculously higher growth plane and that this growth will be sustained through 2015 and thereafter. In the mean time, the Government will spend its way into jobs creation, while protecting its vested interests of the shielded sectors and avoiding any real structural reforms.

Chart:

Sources: IMF WEO database and country updates

Box-out:

Much of the latest attention paid to the external trade data has been devoted this month to the sudden and rapid slowdown in exports over the recent months. And this analysis is very much correct: in H1 2011, Irish goods exports and trade surplus grew by 6% and 2.5% respectively. In H2 2011, the same rates of growth were 1.9% and 1.5%. However, there are some very interesting trends emerging from the trade statistics by geographical distribution. Using eleven months data for 2011, annual rate of growth in Irish trade surplus vis-a-vis the EU is likely to come in at -1.7%, against the overall annual rate of growth of 1.5%. In contrast, Irish trade balance with Russia is likely to rise a massive 92% in 2011 compared to 2010. Our trade deficit with China is likely to decline by 9%. Although our trade deficit with India is expected to widen by almost 11%, our trade surplus with Brazil is on track to increase by almost 32%. Courtesy of Brazil and Russia, Irish trade surplus with BRICs in 2011 is likely to have reached close to €238 million, first year surplus on record.